The processing of motion information by the visual system can be decomposed into two general stages; point-by-point local motion extraction, followed by global motion extraction through the pooling of the local motion signals. The direction aftereffect (DAE) is a well known phenomenon in which prior adaptation to a unidirectional moving pattern results in an exaggerated perceived direction difference between the adapted direction and a subsequently viewed stimulus moving in a different direction. The experiments in this paper sought to identify where the adaptation underlying the DAE occurs within the motion processing hierarchy. We found that the DAE exhibits interocular transfer, thus demonstrating that the underlying adapted neural mechanisms are binocularly driven and must, therefore, reside in the visual cortex. The remaining experiments measured the speed tuning of the DAE, and used the derived function to test a number of local and global models of the phenomenon. Our data provide compelling evidence that the DAE is driven by the adaptation of motion-sensitive neurons at the local-processing stage of motion encoding. This is in contrast to earlier research showing that direction repulsion, which can be viewed as a simultaneous presentation counterpart to the DAE, is a global motion process. This leads us to conclude that the DAE and direction repulsion reflect interactions between motion-sensitive neural mechanisms at different levels of the motion-processing hierarchy.